E-Business Eighth Edition Chapter 4 Marketing on the Web 1 1

Learning Objectives In this chapter, you will learn about: When to use product-based and customer-based marketing strategies Communicating with different market segments Customer relationship intensity and the customer relationship life cycle Using advertising on the Web E-Business, Eighth Edition 2 2 2

Learning Objectives (cont’d.) E-mail marketing Technology-enabled customer relationship management Creating and maintaining brands on the Web Search engine positioning and domain name selection E-Business, Eighth Edition 3 3 3

Web Marketing Strategies Marketing mix Element combination to achieve goals Selling and promoting products and services Marketing strategy Marketing mix with elements defined Four Ps of marketing Product Physical item or service sold Brand: customers’ product perception E-Business, Eighth Edition 4 4 4

Web Marketing Strategies (cont’d.) Four Ps of marketing (cont’d.) Marketing mix price element Amount customer pays for product Promotion Any means to spread word about product The issue of place (distribution) Need to have products or services available In many different locations Long-term problem Getting right products to the right places At the best time to sell them E-Business, Eighth Edition 5 5 5

Product-Based Marketing Strategies Web presence must integrate with image, brand Product-based organization Managers think of physical objects sold or used Customers think in terms of product categories Examples Web office supply stores (Staples) Previous print catalog sales (Sears) Both examples: Organized Web sites from internal viewpoint E-Business, Eighth Edition 6

E-Business, Eighth Edition 7

E-Business, Eighth Edition 8

Customer-Based Marketing Strategies Identify customer groups sharing common characteristics Example: Saber Holdings Four main groups (with potential subgroups) Technique pioneered on B2B sites first Customized product and service offerings Match customers’ needs B2C sites Adding customer-based marketing elements Example: university Web sites Web sites designed with links for specific stakeholders E-Business, Eighth Edition 9

E-Business, Eighth Edition 10

Communicating with Different Market Segments Communications media selection to carry message Physical world Use building construction and floor space design Example: Banks Online firm No physical presence Customer contact through media and Web site Communications media selection is critical Online firm challenge Customer trust with no physical presence E-Business, Eighth Edition 11

Trust, Complexity, and Media Choice The Web Intermediate step Between mass media and personal contact Potential customer Web communication Offers advantages of personal contact selling Cost savings of mass media Mass media Offers lowest trust level Costs spread over any people E-Business, Eighth Edition 12

E-Business, Eighth Edition 13

Trust, Complexity, and Media Choice (cont’d.) Complexity level inherent in product and service Important factor in media choice Mass media Products with few characteristics, easy to understand Expensive (deliver short messages) Personal contact Highly complex products and services Customers may ask questions E-Business, Eighth Edition 14

Trust, Complexity, and Media Choice (cont’d.) Web (middle ground) Offers various elements Deliver short, focused messages Engage potential customer Give customers ability to choose interaction level Resistance to mass media messages Successful campaigns Rely on passive nature of media consumption Web use Capture benefits of personal contact Avoid costs inherent in that approach E-Business, Eighth Edition 15

Market Segmentation Divides potential customer pool into segments Defined in demographic characteristics terms Micromarketing Practice of targeting very small market segments Three categories to identify market segments Geographic segmentation Demographic segmentation Psychographic segmentation Television advertisers Use three categories or combination E-Business, Eighth Edition 16

Companies try to: Match advertising messages to market segments Build sales environment for a product or service Corresponds to market segment trying to reach E-Business, Eighth Edition 17

Market Segmentation on the Web Web opportunity Present different store environments online Steve Madden site Target: young, fashion-conscious buyers Talbots site More muted, conservative style Limitations of physical retail stores Floor and display space Must convey one particular message Web stores Separate virtual spaces for different market segments E-Business, Eighth Edition 18

Offering Customers a Choice on the Web One-to-one marketing Offering products, services matched to needs of a particular customer Dell Offers number of different ways to do business Home page links for each major customer group Specific products, product categories links available Dell Premier accounts High level of customer-based market segmentation E-Business, Eighth Edition 19

Beyond Market Segmentation: Customer Behavior and Relationship Intensity Recap Companies target similar customer groups as market segments One-to-one marketing Chance to create individually unique Web experiences Next step Use the Web to target specific customers in different ways at different times E-Business, Eighth Edition 20

Segmentation Using Customer Behavior Same person Requires different products and services combinations Depending on the occasion Behavioral segmentation Creation of separate customer experiences based on their behavior Occasion segmentation Based on things happening at a specific time or occasion E-Business, Eighth Edition 21

Segmentation Using Customer Behavior (cont’d.) Online world single Web site design Easier to meet needs of different behavioral modes Elements appealing to different behavioral segments Market research study Preferences toward different product, service combinations Web site features How preferences affected by modes of interaction Finding People want range of interaction possibilities Identified common behavior patterns E-Business, Eighth Edition 22

Segmentation Using Customer Behavior (cont’d.) Browsers Visitors just surfing or browsing Web site: offer something to piques visitors’ interest Trigger words Jog visitors’ memories Remind visitors of something they want to buy on the site Have links to site explanations, instructions Include extra content related to product, service Leads to favorable impression (bookmark) E-Business, Eighth Edition 23

Segmentation Using Customer Behavior (cont’d.) Buyers Ready to make a purchase right away Offer certainty Nothing will get in way of purchase transaction Shopping cart Part of Web site Keeps track of selected items for purchase Automates purchasing process Offers link back into shopping area Goal Get buyer to shopping cart as quickly as possible E-Business, Eighth Edition 24

Segmentation Using Customer Behavior (cont’d.) Shoppers Motivated to buy Looking for more information before purchase Offer comparison tools, product reviews, and features lists E-Business, Eighth Edition 25

Segmentation Using Customer Behavior (cont’d.) Alternative visitor mode models McKinsey & Company’s six behavior-based categories Simplifiers (convenience) Surfers (find information, explore new ideas, shop) Bargainers (search for good deal) Connectors (stay in touch with other people) Routiners (return to same sites over and over) Sportsters (spend time on sports, entertainment sites) Challenge Identify groups Formulate ways of generating revenue E-Business, Eighth Edition 26

Customer Relationship Intensity and Life-Cycle Segmentation One-to-one marketing and usage-based segmentation value Strengthen companies’ relationships with customers Good customer experiences Create intense loyalty feeling toward the company, products, services Typical five-stage model of customer loyalty See Figure 4-6 E-Business, Eighth Edition 27

Fifth stage (separation) First four stages Show increase in relationship intensity Fifth stage (separation) Decline occurs Relationship terminates E-Business, Eighth Edition 28

Customer Relationship Intensity and Life-Cycle Segmentation (cont’d.) Awareness Customers recognize company name, product Exploration Customers learn more about company, products Familiarity Customers have completed several transactions Aware of returns, credits policies, and pricing flexibility E-Business, Eighth Edition 29

Customer Relationship Intensity and Life-Cycle Segmentation (cont’d.) Commitment Customer experiences considerable number of highly satisfactory encounters Develops fierce loyalty or strong preference Separation Conditions that made relationship valuable change Parties enter separation stage Life-Cycle Segmentation Customer life cycle: (five stages) Analyzing how customers’ behavior changes as they move through stages E-Business, Eighth Edition 30

Acquisition, Conversion, and Retention of Customers Goal Attract new visitors to a Web site Acquisition cost Total amount of money site spends (average) to draw one visitor to site Conversion Convert first-time visitor into a customer Conversion cost Total amount of money site spends (average) to induce one visitor to make a purchase, sign up for a subscription, or register E-Business, Eighth Edition 31

Acquisition, Conversion, and Retention of Customers (cont’d.) Conversion cost may be greater than profit earned on the average sale Retained customers Return one or more times after making first purchases Retention costs Costs of inducing customers to return and buy again Importance of measuring these costs Indicates successful advertising, promotion strategies More precise than classifying into five loyalty stages E-Business, Eighth Edition 32

Customer Acquisition, Conversion, and Retention: The Funnel Model Conceptual tool Understand overall nature of marketing strategy Provides clear structure for evaluating specific strategy elements Very similar to customer life-cycle model Less abstract Better at showing effectiveness of two or more specific strategies Provides good analogy for the operation of marketing strategy E-Business, Eighth Edition 33

E-Business, Eighth Edition 34

Advertising on the Web Effective advertising involves communication Five-stage customer loyalty model: helpful in creating messages Awareness stage Advertising message should inform Exploration stage Message should explain how product, service works Encourage switching brands Familiarity stage Message should be persuasive E-Business, Eighth Edition 35

Advertising on the Web (cont’d.) Five-stage customer loyalty model (cont’d.) Commitment stage Reminder messages Separation stage Not targeted Online advertising Always coordinate with existing advertising efforts E-Business, Eighth Edition 36

Banner Ads Banner ad Attention-grabbing Small rectangular object on Web page Displays stationary or moving graphic Includes hyperlink to advertiser’s Web site Versatile Attention-grabbing Uses animated GIFs and rich media objects Created using Shockwave, Java, Flash Marketing unit (IMU) ad formats Voluntary standard banner sizes E-Business, Eighth Edition 37

Banner Ads (cont’d.) Leaderboard ad Skyscraper ad Advertising agencies Designed to span Web page top or bottom Skyscraper ad Designed to be placed on Web page side Remains visible as user scrolls through page Advertising agencies Create banner ads for online clients Price range: $100 to more than $2000 Companies can make their own banner ads E-Business, Eighth Edition 38

Banner Ads (cont’d.) Banner ad placement Use a banner exchange network Coordinates ad sharing Sites run one company’s ad Company’s site runs other exchange members’ ads Find Web sites appealing to company’s market segments Pay sites to carry ad Use a banner advertising network Acts as broker between advertisers and Web sites that carry ads E-Business, Eighth Edition 39

Banner Ads (cont’d.) New strategies for banner ads Banner ads were a novelty initially They now have decreased ability to attract attention Solutions Introduced animated GIFs with moving elements Created ads displaying rich media effects (movie clips) Added interactive effects (Java programs): respond to user’s click with some action See Figure 4-8 E-Business, Eighth Edition 40

E-Business, Eighth Edition 41

Text Ads Short promotional message Simple but very effective No graphic elements Usually placed along Web page top or right side Simple but very effective Example: Google Initially criticized for including obtrusive ads on its pages Now clearly labels ads (to prevent confusion) Inline text ad Text in stories displayed as hyperlinks E-Business, Eighth Edition 42

Other Web Ad Formats Pop-up ad Pop-behind ad Ad-blocking software Appears in its own window When user opens or closes Web page Extremely annoying Must click close button (small) in window of ad Pop-behind ad Pop-up ad followed by command (quick) Returns focus to original browser window Ad-blocking software Prevents banner ads and pop-up ads from loading E-Business, Eighth Edition 43

Other Web Ad Formats (cont’d.) Interstitial ad User clicks link to load page Interstitial ad opens in its own browser window Instead of page user intended to load Many close automatically Others require user to click a button Rich media ads (active ads) Generate graphical activity that “floats” over the Web page itself E-Business, Eighth Edition 44

Site Sponsorships Web sites offer advertisers opportunity to sponsor all (or parts) of their sites More subtle way to promote products, services, brands Goals similar to sporting event sponsors, television program sponsors Tie company (product) name to an event (set of information) Ethical concerns raised If sponsor is allowed to create content or weave advertising message into site’s content E-Business, Eighth Edition 45

Online Advertising Cost and Effectiveness Web sites make favorable impression on potential customers Raises issue of measuring Web site effectiveness Cost per thousand (CPM) “M” from Roman numeral for “thousand” Dollar amount paid for every thousand people in the estimated audience Measuring Web audiences (complicated) Web’s interactivity Value of visitor to an advertiser Depends on information site gathers from visitor E-Business, Eighth Edition 46

Online Advertising Cost and Effectiveness (cont’d.) Visit Occurs when visitor requests a page from Web site Trial visit First time a particular visitor loads Web site page Repeat visits: subsequent page loads Ad view: occurs if page contains an ad Impression: each time banner ad loads Click (click-through) Action whereby visitor clicks banner ad to open advertiser’s page E-Business, Eighth Edition 47

E-Business, Eighth Edition 48

Online Advertising Cost and Effectiveness (cont’d.) New metrics to evaluate number of desired advertising yield outcomes Measure number of new visitors who buy first time after arriving at site By way of click-through Calculate advertising cost of acquiring one customer on the Web Compare to how much it costs to acquire one customer through traditional channels E-Business, Eighth Edition 49

Effectiveness of Online Advertising Remains difficult to measure Major problem Lack of single industry standard measuring service Solution (2004) Set of media measurement guidelines Used by all online advertisers Produce comparable ad view numbers Difficulties remain Site visitors change Web surfing behaviors, habits E-Business, Eighth Edition 50

E-mail Marketing Key element Obtain customers’ approvals Before sending marketing or promotional e-mail message E-Business, Eighth Edition 51

Permission Marketing Opt-in e-mail Practice of sending e-mail messages to people who request information Part of marketing strategy: permission marketing More successful than sending general promotional messages through mass media Cost effective Can cost less than one cent if company already has customer’s e-mail address E-Business, Eighth Edition 52

Combining Content and Advertising Using articles, news stories of interest to specific market segments Advertisers send content by: Using inserted hyperlinks into e-mail messages Takes customers to advertiser’s Web site content Induces customer to stay on the site and consider making purchases E-Business, Eighth Edition 53

Outsourcing E-Mail Processing Number of customers who opt-in to information-laden e-mails Can have rapid growth Outgrow capacity of information technology staff Solution Use e-mail processing service provider E-Business, Eighth Edition 54

Technology-Enabled Customer Relationship Management Clickstream Information Web site gathers about visitors Technology-enabled relationship management Firm obtains detailed customer’s information to: Set prices, negotiate terms, tailor promotions, add product features, and customize its entire relationship with that customer Customer relationship management (CRM) Technology-enabled customer relationship management Electronic customer relationship management (eCRM) E-Business, Eighth Edition 55

E-Business, Eighth Edition 56

CRM as a Source of Value in the Marketspace Commerce in the information world Value creation requires different processes Firms use information to create new value for customers Track and examine Web site visitor behavior Use that information to provide customized, value-added digital products and services Early CRM effort failed Overly complex E-Business, Eighth Edition 57

CRM as a Source of Value in the Marketspace (cont’d.) Current CRM efforts more successful Less ambitious in scope Limit data collection to key facts Customer touchpoint Any occurrence of contact between customer and any part of the company Data warehouse Large database Contains multiple sources of information about customers, their preferences, their behavior E-Business, Eighth Edition 58

CRM as a Source of Value in the Marketspace (cont’d.) Data mining (analytical processing) Technique that examines stored information Looks for unknown, unsuspected patterns in the data Statistical modeling Technique that tests CRM analysts’ theories about relationships among elements of customer and sales data E-Business, Eighth Edition 59

E-Business, Eighth Edition 60

Creating and Maintaining Brands on the Web Branded products Easier to advertise and promote Each product carries reputation of the brand name Value of trusted major brands Far exceeds cost of creating them E-Business, Eighth Edition 61

Elements of Branding Three key brand elements Product differentiation Clearly distinguish product from all others Relevance Degree to which product offers utility to customer Perceived value (key element) Customer perceives a value in buying product Brands can lose their value Environment changes E-Business, Eighth Edition 62

E-Business, Eighth Edition 63

Emotional Branding vs. Rational Branding Emotional appeals Work well if ad targets in passive mode of information acceptance Television, radio, billboards, print media Difficult to convey on Web Active medium controlled by customer Rational branding Offer to help Web users in some way In exchange for viewing an ad Relies on cognitive appeal of specific help offered E-Business, Eighth Edition 64

Brand Leveraging Strategies Extend dominant positions to other products and services Examples Yahoo! Amazon.com E-Business, Eighth Edition 65

Brand Consolidation Strategies Market intermediary Example Della & James: online bridal registry Now WeddingChannel.com Created single registry connecting to several local and national department, gift stores Logo and branding of each participating store Featured prominently on WeddingChannel.com site Provides valuable consolidating activity for registering couples, guests E-Business, Eighth Edition 66

Costs of Branding Transferring existing brands to the Web 1998 Less expensive than creating entirely new brand 1998 Top 100 electronic commerce sites each spent an average of $8 million March 2000 Money supply began drying up Company’s Web presence promoting Integral part of brand development, maintenance Company’s URL On product packaging, mass media advertising E-Business, Eighth Edition 67

Affiliate Marketing Strategies One firm’s Web site (affiliate site) Includes descriptions, reviews, ratings, other information about a product linked to another firm’s site (offers item for sale) Affiliate site receives commission For every visitor following link from affiliate’s site to seller’s site Affiliate saves expenses Handling inventory, advertising and promoting product, transaction processing E-Business, Eighth Edition 68

Affiliate Marketing Strategies (cont’d.) Cause marketing Affiliate marketing program benefiting charitable organization Visitor clicks on link (on affiliate’s Web page) Donation made by a sponsoring company Page loads after visitor clicks donation link Carries advertising for sponsoring companies E-Business, Eighth Edition 69

Affiliate Marketing Strategies (cont’d.) Affiliate commissions Pay-per-click model Affiliate earns commission Each time site visitor clicks link, loads the seller’s page Pay-per-conversion model Affiliate earns a commission Each time site visitor converted from visitor into qualified prospect or customer Affiliate program broker (clearinghouse or marketplace) For sites that run affiliate programs, want to become affiliates E-Business, Eighth Edition 70

Viral Marketing Strategies Relies on existing customers Tell other people (prospective customers) about products or service Use individual customers to spread the word about a company Example: BlueMountain Arts Electronic greeting cards E-mail messages that include link to greeting card site E-Business, Eighth Edition 71

Search Engine Positioning and Domain Names Ways that potential customers find Web sites Referred by friend Referred by affiliate marketing partner See site’s URL in print advertisement, television Arrive unintentionally after mistyping similar URL Use a search engine or directory Web site E-Business, Eighth Edition 72

Search Engines and Web Directories Web site that helps people find things on the Web Contains three major parts Spider (crawler, robot, bot) Program automatically searches Web to find potentially interesting Web pages for people Index (database) Storage element of search engine Search utility Takes terms, finds matching Web page entries in index E-Business, Eighth Edition 73

Search Engines and Web Directories (cont’d.) Provide classified hierarchical lists of categories Search engine ranking Weighting of factors Search engines uses factors to decide URLs that appear first on searches for a particular search term Search engine positioning (search engine optimization, search engine placement) Results from the combined art and science of having a particular URL listed near the top of search engine E-Business, Eighth Edition 74

Paid Search Engine Inclusion and Placement Paid placement (sponsorship, search term sponsorship) Option of purchasing top listing on results pages for a particular set of search terms Buy banner ad space at the top of search results pages that include certain terms Search engine positioning: complex subject Spending on online advertising See Figures 4-13 and 4-14 E-Business, Eighth Edition 75

E-Business, Eighth Edition 76

E-Business, Eighth Edition 77

Paid Search Engine Inclusion and Placement (cont’d.) Search engine placement brokers Companies that aggregate inclusion and placement rights on multiple search engines Sell those combination packages to advertisers Google does not use placement broker Sells services directly (Google AdWords program) Contextual advertising (potential flaw) Ads placed in proximity to related content Localized advertising Ads related to location on search results E-Business, Eighth Edition 78

E-Business, Eighth Edition 79

Web Site Naming Issues Companies would like URLs for their Web sites to reflect name or reputation Troublesome domain names Purchase more suitable domain names Companies often buy more than one domain name In case user misspells URL Redirected to intended site Have different names or forms of names E-Business, Eighth Edition 80

Buying, selling, and leasing domain names Recently, higher prices have prevailed in the market for domain names E-Business, Eighth Edition 81

Web Site Naming Issues (cont’d.) URL brokers and registrars Sell, lease, auction domain names Internet Corporation for Assigned Names and Numbers (ICANN) Maintains accredited registrars list Registrars offer domain name search tools Domain name parking (domain name hosting) Service permitting domain name purchaser to maintain simple Web site So domain name remains in use E-Business, Eighth Edition 82

Summary Achieve Web marketing goals Use principles of marketing strategy Use the four Ps of marketing Product-based marketing strategy Customer-based strategy Web enables companies to mix Market segmentation works well on the Web Online advertising More intrusive since introduction Various types E-Business, Eighth Edition 83

Summary (cont’d.) Use Web to manage customer relationships Focused CRM efforts More successful than earlier comprehensive attempts Use rational branding instead of emotional branding techniques on the Web Critical to success Successful search engine positioning Domain name selection E-Business, Eighth Edition 84